One of today’s top movers to the downside is Exela Technologies (NASDAQ:XELA). After announcing a 1-for-200 stock split on Friday, shares of XELA stock plunged more than 40% in today’s session, as investors appear to be pricing additional risk into this stock.
Exela’s previous close price of 2.5 cents on Friday put the company at significant risk of delisting. Accordingly, investors appear to remain highly concerned about this company’s prospects, with the stock declining from an opening price today of $5 per share to below $3 per share at the time of writing.
Let’s dive into what to make of this news for investors considering this digital process services company.
Why Is XELA Stock Plunging Today?
Exela’s massive reverse stock split may have taken some investors aback. Indeed, the company’s stock price began dipping immediately prior to trading today, with investors appearing to look to other high-profile low-priced stocks.
The company’s previous share count of 1.27 billion issued and outstanding shares has been cut to around 6.4 million shares after this split. Thus, this is a company that’s now worth less than $20 million. This may seem like a steal to some investors, considering the company generated $1.1 billion in revenue last year.
That said, Exela is a company that’s burning a significant amount of cash, with more than $87 billion of cash burned during the last fiscal year. Thus, this appears to be a company investors are assessing on the basis of its profitability potential and cash-burn runway.
While meme-stock investors may continue to look at this stock, it’s far too speculative for the average investor. In my view, this is a company to avoid, at least over the near term, until its price action improves.
On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.